Musikfest beer stein fraud allegations aired in federal court

A judge must decide whether all customers who bought the 'hand-crafted in Germany' mugs from 2006 to 2011 can join a class-action suit.

April 02, 2013|By Patrick Lester, Of The Morning Call

A New Jersey lawyer argued in federal court in Allentown on Tuesday that hundreds of Musikfest-goers who bought $70 beer steins at the annual Bethlehem festival were victims of a fraud carried out by ArtsQuest, which should be forced to pay back those customers.

An ArtsQuest attorney countered that while blank steins were manufactured in China, they were decorated in Germany, where they went through a "substantial transformation," which qualifies them as products made in Germany. He argues that class-action status isn't warranted.

It will be up to U.S. District Judge James Knoll Gardner to decide whether all customers who purchased those beer steins between 2006 and 2011 can join a class-action lawsuit filed last year by former ArtsQuest employee Rebecca Stoneback, who claims she found the ceramic steins in original shipping boxes that showed they came from China.

Stoneback, who also filed a wrongful termination lawsuit, has accused ArtsQuest and her superiors of violations of the Racketeer Influenced and Corrupt Organizations Act (RICO) and of unfair trade practices. She said Muskifest had marketed the mugs as "hand-crafted in Germany."

Gardner declined to make an immediate decision on the class-action request after a more than three-hour hearing, during which he closely scrutinized the design, logo and lids on the ceramic steins.

"It looks like a flea market in here," Gardner said after seeing the steins lined up on a courtroom table. Gardner, who noted that German steins are the "Mercedes Benz" of steins, said he would rule on the request at a later date.

During the court proceeding, Justin L. Swidler, the New Jersey attorney representing Stoneback, said he had an email to a vendor from ArtsQuest employee Tonya Doddy, who is named as a defendant in the lawsuit, requesting that a "Made in China" label not be used on the steins.

Meanwhile, it was also revealed during the hearing that Swidler, before filing the lawsuit in June 2012, emailed ArtsQuest President Jeff Parks proposing a settlement under which Stoneback would not file a lawsuit if given a $250,000 severance.

ArtsQuest attorney Patrick Reilly mentioned that settlement request as part of his argument that Stoneback is not an adequate representative of those who purchased beer steins. He argued that Stoneback has a grudge against ArtsQuest.

Stoneback, in her suit, claims her concerns about the origin of the steins were dismissed and that she was told a day after she raised the concerns that she was no longer needed at ArtsQuest.

Reilly argued that "mini trials" would be needed to determine whether any additional plaintiffs can be added to the case. He said not everyone purchased steins or mugs at Musikfest based on the belief that the items were made in Germany.

Some, he said, purchased them as souvenirs or collectible items, or just based on impulse.

"To this day, no one has requested a refund for this so-called Chinese junk," Reilly told the judge. He further argued that the festival is "not about German heritage, not about German people, it's about music."

Swidler estimated that a "few hundred" people could potentially join the lawsuit after purchasing steins between 2006 and 2011. Reilly said an average of 147 steins sold for $69.99 and 250 mugs sold for $19.99 are purchased.

The lawsuit targets ArtsQuest, Parks, Doddy and Walter Keiper Jr, senior vice president of finance and administration. None of the ArtsQuest employees attended the hearing.

Michael Grube is listed as a plaintiff along with Stoneback.

Musikfest began in 1984 with six "platzes" attracting about 100,000 people over 10 days to a festival spanning the area under the Hill-to-Hill Bridge and downtown Bethlehem.

It now boasts 15 stages on both sides of the Lehigh River, including ArtsQuest's new SteelStacks campus. Attendance has sometimes exceeded 1 million in recent years, and the festival's studies have shown Musikfest packs a $39 million economic punch for the region.